Page 110 - RFHL ANNUAL REPORT 2024_ONLINE

108 Notes to the Consolidated Financial Statements
For the Year Ended September 30, 2024.
Expressed in millions of Trinidad and Tobago dollars, except where otherwise stated.

2. Material accounting policies (continued)
2.6 Summary of material accounting policies (continued)
d Financial assets and liabilities (continued)
ii Financial assets at Fair value through profit or loss (continued)

Financial assets at FVPL are recorded in the Consolidated statement of financial position at fair value. Interest
earned or incurred on instruments designated at FVPL is accrued in interest income, using the Effective Interest
Rate (EIR), taking into account any discount/premium and qualifying transaction costs being an integral part of
the instrument. Dividend income from equity instruments measured at FVPL is recorded in profit or loss as other
income when the right to the payment has been established.

iii Undrawn loan commitments
Undrawn loan commitments and letters of credit are commitments under which, over the duration of the
commitment, the Group is required to provide a loan with pre-specified terms to the customer. These contracts
are in the scope of the Expected Credit Loss (ECL) requirements but no ECL was determined based on historical
observation of defaults.

iv Debt securities and Other fund raising instruments
Financial liabilities issued by the Group that are designated at amortised cost, are classified as liabilities under
Debt securities in issue and Other fund raising instruments, where the substance of the contractual arrangement
results in the Group having an obligation to deliver cash to satisfy the obligation. After initial measurement, debt
issued and other borrowed funds are subsequently measured at amortised cost. Amortised cost is calculated by
taking into account any discount or premium on issued funds, and costs that are an integral part of the EIR.

e Reclassification of financial assets and liabilities
The Group does not reclassify its financial assets subsequent to their initial recognition, apart from the exceptional
circumstances in which the Group acquires, disposes of, or terminates a business line. Financial liabilities are never
reclassified.

f Derecognition of financial assets and liabilities
Derecognition due to substantial modification of terms and conditions
The Group derecognises a financial asset, such as a loan to a customer, to facilitate changes to the original loan
agreement or arrangement due to weaknesses in the borrower’s financial position and/or non-repayment of the debt
as arranged, and terms and conditions have been restructured to the extent that, substantially, it becomes a new
loan, with the difference recognised as an impairment loss. The newly recognised loans are classified as Stage 2 for
ECL measurement purposes.

When assessing whether or not to derecognise a loan to a customer, amongst others, the Group considers the
following factors:
• Change in currency of the loan
• Change in counterparty
• If the modification is such that the instrument would no longer meet the SPPI criterion

If the modification does not result in cash flows that are substantially different, the modification does not result in
derecognition. Based on the change in cash flows discounted at the original rate (or credit-adjusted EIR for purchased
or credit-impaired financial assets), the Group records a modification gain or loss, to the extent that an impairment
loss has not already been recorded.